Wednesday, October 24, 2007

A Person Moans in a Country that at Least 5 Billion Others Would Gladly Swap Places With For His Misery

In what is becoming a typical rant of despair among us, Alfred Sant writes in the Times of Malta.com (24 Oct) here: “Praying mantis”:

“The dominant ideology... which will be with us for a long time: indeed, till we all are dead... is defined by free market mechanisms. They belong in large part to Adam Smith's thesis, that free competition between the factors of production ensures the best price and quality, through a balance between supply and demand, fuelled by the self-interest of all those involved in production, distribution and the rest. Devised at a time when enterprises were relatively small and the room for rapid innovation was enormous, this ideology had its ups and downs... not least when confronted with statist and centrally-planned models of how to organise society. With the demise of most such "socialist" models, the free market ideology has had a free run in laying out the basis for the ongoing economic and social give and take within modern societies. This has continued to happen despite the fact that organisations and their operating environments have altered immeasurably since Smith's time. From local, industrial organisations have gone multinational, then global. They are no longer First or Second World - many have become Third World-based or owned.

Services as a source of wealth creation have burgeoned, fuelled by the spread of new "service" products that frequently go through conceptual quantum leaps. Technologies - not least in the communications area - morph rapidly. They multiply the available ranges of information on which one decides about lifestyles, as well as about purchasing and selling. Complex bureaucracies take business and governmental decisions, nationally and supranationally.

In this context, Smith's free trade ideas should have rapidly become obsolescent. That is hardly their status at present. How then does one deal with recession and the creation of jobs? How does one conceptualise inflation in order to stub it out? When I was young or younger, the belief still was that Maynard Keynes had gotten it right: the market stayed free and competitive but the state could dig in. To achieve "rational" objectives related to economic growth and social balancing, the state could - by implementing far-sighted investments, tax stimuli, and by restraining or increasing its current expenditure - ensure objectives that are considered by one and all to be desirable. Among such objectives are full to quasi-full employment... a minimal rate of price inflation... a steady and "balanced" growth in capital investment...

The non-market mechanisms deployed by the state would ensure the preservation and enhancement of Smith's free market. Keynes' audacious non sequitur made sense for three decades or so. Then it was abandoned under the political offensives launched during the Reagan and Thatcher years - which made free market beliefs a sine qua non for all reputable members of the intellectual and economic nomenklatura. We live in a vastly different world to that of Adam Smith. Even so, the new orthodoxy, which, on the surface, embraces his ideas, still seems more robust than the Keynesian compromise...

Because of the mismatch between the reality in which Smith theorised and our reality of today, the new orthodoxy is leading to hard choices where most of us - middle- and lower-income earners - lose.”

CommentThere’s too much in this extract to tackle piece by piece. The alleged ‘free market thesis’ of Adam, Smith is barely recognizable. Alfred Sant calls it an ideology without explaining how Wealth Of Nations, a critique of mercantile political economy, is an ideology. That a free market could be turned into an ideology is perfectly legitimate, but whether Adam Smith held such a view is most doubtful.

However blessed the mid-18th century was by ‘the room for rapid innovation’ it was as nothing compared to the scale of innovation, and its speed, today. Why Adam Smith’s ‘free trade ideas should have rapidly become obsolescent’ is not explained; mercantile political economy has not left the scene by a long way.

The century of colonialism was a great diversion that cost a great deal in blood and treasure which could have been more productively spend on enhancing the capital base and raising through employment many millions of low paid and unemployed people towards opulence.

Adam Smith’s ideas on free trade were not implemented; the free trade that evolved was heavily undermined by the one-way street of colonial ism and the failed experiment with communism.

The reality of attempts to ‘ensure the preservation and enhancement of Smith's free market’ was neither free nor Smithian.

This leads to Alfred Sant concluding: “Because of the mismatch between the reality in which Smith theorised and our reality of today, the new orthodoxy is leading to hard choices where most of us - middle- and lower-income earners - lose.”

This from a citizen of a member state of the European Union, one of the few really rich continents on the planet where many moan but none leave, while many try to enter from the really poor parts of the world because they know what absolute and relative deprivation really means.